Samsung Elec CEO Kwon Oh-hyun to resign despite stellar performance

Samsung Elec CEO Kwon Oh-hyun to resign despite stellar performance

Samsung Electronics Co. vice chairman Kwon Oh-hyun, who has been leading the company amid the absence of Samsung Group heir Jay Y. Lee, will step down from the management, the company said on Friday.

Kwon said in a letter to Samsung Electronics employees that he had been thinking of his departure “for quiet some time” and could “no longer put it off.”

"As we are confronted with unprecedented crisis inside out, I believe that time has now come for the company start anew, with a new spirit and young leadership to better respond to challenges arising from the rapidly changing IT industry,” Kwon continued.

Kwon has been the de-facto chief of the electronics giant after Samsung scion Lee, also vice chairman of Samsung Electronics, was arrested earlier this year for bribery and other charges in a massive corruption scandal that removed Korea’s former President Park Geun-hye. Lee was sentenced to five years in prison in August on bribing Park’s confidante in return for help in succeeding his father. He has appealed denying the charges.

Kwon, who has led Samsung Electronics’ hugely successful component business, has been the vice chairman of the company since 2012. His resignation will take effect at the end of his board term in March 2018. He joined the company as a research in 1985.

His resignation announcement comes at a surprise after the company earlier on the same day tipped it is on track to report a record high profit for the third quarter.

In a regulatory filing on Friday, Samsung Electronics said its operating profit for the quarter ended September has nearly tripled to 14.5 trillion won ($12.8 billion) from a year ago, while its sales jumped 29.7 percent to 62 trillion won. Its previous record high operating profit was 14.1 trillion won in the second quarter.

The stellar performance was largely attributed to the prolonged boom in the global semiconductor market that has buoyed the chip prices. Although the company did not disclose break down results by divisions, local market analysts estimated that the company has earned more than 10 trillion won in operating profit from its semiconductor business. Outlook for its chip business in the fourth quarter looks rosier.

Do Hyun-woo, an analyst at Mirae Asset Daewoo Co., expected improvement in the company’s earnings across the board except IT & Mobile (IM) division in the fourth quarter. “New smartphone releases from rivals, in particular, the iPhoneX by Apple, would have some (adverse) impact on the company’s IM earnings, but they (new devices) would give a big boost to the company’s component business.”

The company’s IM division was also estimated to have recorded about 3 trillion won in the third quarter after its profit plunged a year ago due to the Note 7. Expectations are growing that Samsung Electronics would restore lost trust from consumers with the new premium phone Galaxy Note 8, which has received the company’s highest number of pre-orders ever.

Now market analysts watch closely who would succeed Kwon to lead the world’s largest memory chip and smartphone maker to maintain stellar performance amid Lee’s absence.